Highlights of the RBI Monetary Policy statement

The following are the major highlights of the fourth bi-monthly Monetary Policy Statement 2015-16, made by Reserve Bank of India Governor Raghuram Rajan on Tuesday:

Reduction of the policy repo rate (short-term lending rate to banks) under the liquidity adjustment facility (LAF) by 50 basis points from 7.25 percent to 6.75 percent with immediate effect.

No change in the cash reserve ratio (CRR) of scheduled banks from four percent of net demand and time liability (NDTL).

Permit Indian corporates to issue rupee denominated bonds with a minimum maturity of five years at overseas locations, subject to the ceiling of $51 billion on foreign investment permitted in corporate debt.

No restriction on end-usage of rupee denominated bonds issued overseas, except for a small negative list.

Inflation is likely to go up from September for a few months as favourable base effects reverse.

The outlook for food inflation could improve if the increase in sown area translates into higher production.

Revised framework for external commercial borrowing (ECB) to replace existing rules in sync with the current economic and business environment will be issued soon.

New guidelines for participation of gilt account holders in the repo market to be issued by November-end.

Permit scheduled commercial banks to take short positions in the When Issued (WI) trading in new and reissued government securities.

Permit regulated entities other than banks and primary dealers to take long positions in the WI market.

To develop repo market electronic dealing platform(s) in corporate bonds, to be designed in consultation with Securities and Exchange Board of India (SEBI).

Stand-alone primary dealers to be permitted in currency futures contracts

Permit exchange traded currency futures and options in three cross-currency pairs, viz euro-US dollar, British pound-US dollar, and US dollar-Japanese yen.

Increase the limit for resident entities for hedging their foreign exchange exposure in the over-the-counter market from $250,000 to one million dollars without the production of any underlying documents, subject to submission of a simple declaration.

Reserve Bank of India to come out with a concept paper on increasing card acceptance infrastructure and move towards less-cash society.

Tentative economic recovery underway in India.

Foreign exchange reserves rose by $10.4 billion during the first half of 2015-16.

Limits for foreign portfolio investment (FPI) in debt securities will henceforth be announced/fixed in rupee terms.

Limit for FPI investment in the central government securities will be increased in phases.